Keego Harbor officials to refinance bonds this month

In 2004 the city issued more than $1 million in general obligation limited tax refunding bonds to pay for improving Cass Lake Road and installing lights and sidewalks. The bond rate was 4.25 percent, said Mayor Sid Rubin.

"We're going to refinance before April 1 to get a lower rate of 2.6 percent," Rubin said.

"The city intends to sell the bonds by a competitive sale or to negotiate the sale with a bank or other financial institutions. The sale will result in the most efficient and expeditious means -- and will result in an immediate annual savings due to lower interest rates."

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The city has issued a notice of redemption to the current bondholders and will accept bids through Feb. 26 and award the sale to the successful bidder that day.

The money will be deposited into the Debt Retirement Fund to be used solely for the purpose of paying principal and interest on the bonds as they mature, using tax revenue generated from the city's tax increment financing authority district, Rubin said.

Tax increment financing is defined as a public financing mechanism through which the growth in taxes (increment) connected with new development or redevelopment can be captured and used to pay costs associated with economic development for the public good, according to officials.

"This is the optimal time to refinance," Rubin said. "Had we done nothing, Keego Harbor would be facing a one-time estimated payment of $ 319,300 in 2022. Instead, the city will have gained an immediate average annual estimated cash savings of $38,413 over the next nine years.

"The challenge was to have enough tax revenue within the TIFA district to retire the annual obligation without ever having to take money from the general operating fund that helps pay for community services. This plan has been a year in the making and our patience in pulling the trigger has paid off."

Rubin says other communities should consider this route.

"So many communities can do this and I don't know why they hesitate," he said. "You don't have to dip into a general fund to come up with shortfalls."